When an asset (of the subsidiary) is revalued to have a
fair value, the additional depreciation resulting from the revaluation of the
assets must be matched with the reserves or retained earnings and credited to
the asset account.
If the revaluation is in the asset of the subsidiary,
and the fair value is recognized at acquisition, it (the fair value) is taken
as part of the pre-acquisition assets acquired and hence, used in the
computation of goodwill.
Example
The statements of financial position of Soup Plc and
Onion Plc as at 31st December, 20x5 are as follows
Additional information
1.
Soup
Plc acquired 70% controlling interest in the equity of Onion Plc on 1st
January, 20x3 when the retained earnings of the latter was N50,000,000.00
2.
As
at 1st January, 20x3, Onion Plc had some items of non–current assets
whose fair value was estimated to be N280,000,000.00 higher than their book
carrying amount on that date but Onion Plc is yeat to incorporate this
information in its books of account. The estimated remaining life of these
assets was 8 years from the date of acquisition.
Required
Prepare the consolidated statement of financial position
in respect of Soup Plc as at 31st December, 20x5.
Suggested solution
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